Re-think on energy charging could reduce bills for 70% of households

Researchers have found that 70% of UK households would be better off if costs of government energy policy were removed from gas and electricity bills and applied according to household income.

Professor John Barrett and Dr Anne Owen, both from the
University of Leeds, propose alternative mechanisms for funding emissions
reduction schemes. Their research, published
today by the UK
Energy Research Centre (UKERC), highlights how it is possible to raise the
necessary funds to address climate change, while also protecting fuel-poor
households.

Currently,
within the domestic sector, levies to recover the costs of energy policy are
applied as a percentage of household energy bills. In 2016 these energy policy
costs added 13% to the average household electricity and gas bills, adding £132
to the average yearly spend.

However, in the
poorest homes, money spent on energy accounts for 10% of total spend, whereas
for the richest households it accounts for just 3%. Applying energy costs on this spend therefore
disproportionately penalises those that are most vulnerable to rising energy
prices, the researchers say.

Accounting for total energy consumed

The research
also compared the total amount of energy consumed by households with different
income levels.

Total energy
consumption measures all of the energy used to provide households with the
products they buy and services they access, and incorporates aspects such as
recreation activities, travel and imported products.

Professor
Barrett, from the Sustainability
Research Institute at Leeds and UKERC Co-Director, said: It is essential
that climate change policies do not cause further inequality by penalising
families with the lowest energy consumption and who are most at risk of fuel
poverty. Progressive energy policies should ensure that those with the highest energy
demand and the means to afford it, pay for the solutions.

The researchers
found that in 2014, the richest 10% of households consumed almost four times as
much energy as the poorest households or an average 12.7 tonnes of oil
equivalent compared to 3.3 tonnes consumed by the poorest.

Energy for heating
and power in homes accounts for only 12% of total energy consumption,
highlighting the significant difference in spending patterns between high and
low income households.

Dr Owen, also
from the Sustainability Research Institute and UKERC researcher, said: Our work shows that once you consider the hidden
energy in the manufacture of all the goods and services we buy, it is only fair
that richer homes contribute more to energy policy costs. Low income
households, which experience fuel poverty, could be exempt from these
additional charges if we re-think how low carbon energy schemes are funded.

Professor
Barrett and Dr Owen have put forward an alternative approach would place policy
costs on businesses, or fund them through general taxation, both of which would
reduce the burden on the poorest households. The general taxation approach
would better align energy demand with policy costs, and would reduce costs for
70% of UK households.